On Friday 27 August 1999 in Buenos Aires, the Minister for Trade, the Hon. Mark Vaile, MP and Argentina’s Deputy Foreign Minister, Ambassador Andres Cisneros signed a comprehensive taxation agreement between Australia and the Argentine Republic for the avoidance of double taxation and the prevention of fiscal evasion.
The new tax agreement is Australia's first with a South American country. It will assist in the strengthening of our already close trade and investment links with Argentina. The new agreement will reduce taxation of Australian businesses operating in Argentina by substantially limiting Argentine taxation of technical assistance, royalties, interest and dividends.
I am confident that it will be well received by the business communities in both countries.
The agreement prevents double taxation by allocating taxing rights between Australia and Argentina in respect of all forms of income flows between the two countries. The basis of allocating these rights is substantially similar to that adopted in Australia's other modern taxation agreements.
The new agreement will enter into force only after the Australian and Argentine Governments have exchanged notes advising each other that the last of the necessary constitutional processes to give the agreement the force of law in both countries has been completed.
See attachment A for details of the agreement.
Copies of the agreement will be available at offices of the Australian Taxation Office (ATO) and can also be accessed via the ATO's internet site at: http://www.ato.gov.au under the heading What's New.
CANBERRA
30 August 1999
Contacts: Ken Allen Australian Taxation Office (02) 6216 1155
David Alexander Assistant Treasurer's Office (02) 6277 7360
ATTACHMENT A
The Agreement will improve the legal and taxation climate for trade and investment between Australia and Argentina by reducing the barriers to trade and investment caused by the overlapping taxing jurisdictions of the two countries. It will also create a framework by which the tax administrations of the two countries can combat international fiscal evasion.
Under the Agreement:
- Argentine withholding taxes rates on Australian companies providing technical assistance to Argentina will fall from up to 28% of gross to 10% of net;
- Argentine interest withholding taxes rates on Australian loans fall from either 15% or 35% to 12%;
- most royalty withholding taxes rates paid by Australians will fall from 24% to 10% or 15%; and
- Argentine dividend withholding tax rates will be limited to 10%, or 15% (currently Argentina only taxes dividends paid out of previously untaxed earnings, but at a rate of 35% of those dividends).
These rates are consistent with the lowest rates achieved in Argentina’s modern treaties. Under a Protocol to the Agreement, if another OECD country achieves a better outcome in its negotiations with Argentina those reduced rates will flow on to Australian residents.
The Agreement will enter into force when the Australian and Argentine Governments have exchanged notes advising each other that the last of the necessary constitutional processes to give the agreement the force of law in their respective countries has been completed. In Australia, legislation will be necessary to give the agreement the force of law and a Bill for that purpose will be introduced into the Parliament as soon as practicable.
Upon entry into force, the Agreement will have effect in Australia for withholding tax purposes in respect of unfranked dividends, interest and royalties derived by a resident of Argentina on or after 1 January in the calendar year following that in which it enters into force. In respect of tax other than withholding tax, the Agreement will have effect in Australia in relation to income, profits or gains of any year of income beginning on or after 1 July in the calendar year next following that in which it enters into force. The Agreement has effect in relation to airline profits from 27 September 1988, when the Air Services Agreement between the two countries took effect.
The Agreement will have effect in Argentina for withholding tax purposes in respect of amounts derived on or after 1 January in the calendar year following that in which it enters into force. For other Argentine taxes, it will have effect in respect of tax years beginning on or after 1 January next following that in which it enters into force.
Reflecting the Government’s commitment to open and accountable treaty making, the Agreement and a National Interest Analysis will be tabled in the Parliament for review by the Joint Standing Committee on Treaties. Legislation will also be required for Australia to fulfil its obligations under the Agreement and a Bill for that purpose will be introduced into Parliament as soon as practicable.
As a further step in opening up the tax treaty making process, final drafts of this Agreement were reviewed by the Tax Treaties Advisory Panel. This Panel of industry representatives and tax practitioners was established by the Australian Taxation Office to comment on proposed and existing tax treaties. The Panel provided a valuable input to the final text of this Agreement.